Form 970

(Rev. November 2020) 

Department of the Treasury 

Internal Revenue Service 

Application To Use LIFO Inventory Method

▶ Attach to your tax return. 

▶ Go to www.irs.gov/Form970 for the latest information. 

OMB No. 1545-0042 

Attachment 

Sequence No. 122

Name of filer (name of parent corporation if a consolidated group) (see instructions) Filer’s identification number (see instructions) 

Name of applicant(s) (if different from filer) and identification number(s) 

Part I Statement of Election Under Section 472 Yes No 

1 The applicant elects to use the LIFO inventory method for the tax year ending (enter month, day, year) ▶ 

 for the following goods (enter here): 

See instructions and attach a statement if necessary. 

2 In an attached statement, identify and describe the inventory method(s) used by the applicant in the prior tax year 

for the goods covered by this election. 

3 a Is the applicant already using the LIFO inventory method for any other goods? . . . . . . . . . . . .

b If “Yes” to line 3a, attach a statement identifying and describing the goods and the LIFO methods used. 

4 a Has the applicant ever used the LIFO inventory method for the goods covered by this election? . . . . . .

b If “Yes” to line 4a, attach a statement listing the tax years for which the LIFO inventory method was used and 

explaining why the LIFO inventory method was discontinued. 

5 The applicant will not use the LIFO inventory method to account for the following goods (enter here): ▶

Attach a statement if necessary. 

Part II LIFO Inventory Requirements Yes No 

6 a Did the applicant value the closing inventories of goods covered by this election at cost for the tax year 

immediately preceding the tax year specified on line 1? . . . . . . . . . . . . . . . . . . .

b If “No” to line 6a, did the applicant value the beginning inventories of goods covered by this election at cost for 

the tax year specified on line 1 as required by section 472(d)? . . . . . . . . . . . . . . . . .

If “No” to line 6b, attach an explanation. 

c If “Yes” to line 6b, will the applicant account for the adjustment required by section 472(d) over a 3-year period? 

If “No” to line 6c, attach an explanation. 

7 a 

 

When determining the beginning inventories of goods covered by this election, did the applicant treat those goods 

as being acquired for a unit cost that is equal to the total cost of those goods divided by the total number of units 

on hand? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b If “No” to line 7a, attach an explanation. 

8 a 

 

Did the applicant (or any member of the same group of financially related corporations as defined in section

472(g)) issue credit statements or reports to shareholders, partners, other proprietors, or beneficiaries covering the

tax year specified on line 1? . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b If “Yes” to line 8a, attach a statement describing the recipient(s), the date(s) of issuance, and the inventory 

method(s) used to determine income, profit, or loss in those statements. 

9 a Will the applicant determine beginning and ending inventories at cost regardless of market value? . . . . .

b If “No” to line 9a, attach an explanation. 

10 a 

 

 

As a condition of adopting the LIFO inventory method, Regulations section 1.472-4 requires a taxpayer to agree 

to make any adjustments incident to the change to, the change from, or the use of, the LIFO inventory method 

that, upon the examination of the taxpayer’s income tax return, the IRS determines are necessary to clearly reflect 

income. Does the applicant agree to this condition? . . . . . . . . . . . . . . . . . . . . .

b If “No” to line 10a, the applicant is not eligible to use the LIFO inventory method and does not need to file Form 970. 

Part III Specific Goods (Unit) Method 

11 Under Regulations section 1.472-1, the types of goods in the opening inventory must be compared with similar types of goods 

in the closing inventories. Attach a list of the types or categories of goods that will be compared, describe the goods that will 

be included in each type or category, and identify the unit of measure (pounds, barrels, feet, etc.) used for each type or 

category. 

For Paperwork Reduction Act Notice, see the instructions. Cat. No. 17057T Form 970 (Rev. 11-2020) 
Form 970 (Rev. 11-2020) Page 2 

Part III Specific Goods (Unit) Method (continued)

12 Check the box corresponding to the method that the applicant will use to determine the cost of the goods in the closing 

inventories in excess of the cost of the goods in the opening inventories. See instructions.

Actual cost of goods most recently purchased or produced 

Average cost of goods purchased or produced during the tax year 

Actual cost of goods purchased or produced in the order of acquisition 

Other (attach explanation) 

Part IV Dollar-Value Method 

13 Attach a statement describing the applicant’s method of defining “items.” 

14 a Did the applicant acquire any of the goods covered by this election at below-market prices? . . . . . Yes No

b 

 

If “Yes” to line 14a, attach a statement explaining whether the applicant did, or will, account for the goods purchased at 

below-market prices and similar goods produced or acquired at market prices as separate items. If the applicant did, or will, 

account for both types of goods as the same item, explain and justify. 

15 Attach a statement describing the method of pooling the applicant will use for the goods covered by this election. If the 

applicant will use more than one dollar-value pool, list and describe the contents of each dollar-value pool. See instructions. 

16 Identify or describe the method the applicant will use to compute the LIFO value of each dollar-value pool containing goods 

covered by this election (for example, double-extension method, link-chain method, or index method). 

If the applicant’s method is neither the double-extension method nor the Inventory Price Index Computation method, attach a 

statement describing the method in detail and justifying the applicant’s use of the selected method. See instructions. 

17 Check the box corresponding to the method the applicant will use to determine the current-year cost of goods in the closing 

inventories and to value the LIFO increments of the dollar-value pool(s). See instructions. 

Actual cost of goods most recently purchased or produced 

Average cost of goods purchased or produced during the tax year 

Actual cost of goods purchased or produced in the order of acquisition 

Other (attach explanation) 

Part V Inventory Price Index Computation (IPIC) Method 

18 Check the box corresponding to the method the applicant will use to compute the LIFO value of each dollar-value pool 

containing goods covered by this election. See instructions. 

Double-extension IPIC method 

Link-chain IPIC method 

19 Check the box corresponding to the table from which the applicant will select Bureau of Labor Statistics (BLS) price indexes. 

See instructions. 

Table 3 of the Consumer Price Index (CPI) Report 

Table 6 of the Producer Price Index (PPI) Detailed Report 

Other table of the PPI Detailed Report 

If the applicant will use “Other table of the PPI Detailed Report,” attach a statement explaining why the other table is more 

appropriate than Table 6. 

20 Will the applicant use the 10 percent method? See instructions . . . . . . . . . . . . . . . Yes No

21 If the applicant elects to use a representative month for selecting BLS price indexes from the applicable report, enter the

representative month elected for each dollar-value pool. 

See instructions and attach a statement if necessary. 

Part VI Other Information 

22 Attach a statement describing the applicant’s method of determining the cost of inventory items (for example, standard cost 

method, actual invoice cost, joint product cost method, or retail inventory method). 

23 Did the applicant receive IRS consent to change the method of valuing inventories for the tax year specified 

on line 1? See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . Yes No

Form 970 (Rev. 11-2020) 
Form 970 (Rev. 11-2020) Page 3 

General Instructions 

Section references are to the Internal Revenue Code unless 

otherwise noted. 

Future Developments 

For the latest information about developments related to Form 

970 and its instructions, such as legislation enacted after they 

were published, go to www.irs.gov/Form970.

Purpose of Form 

Form 970 is filed with your income tax return to elect to use the 

last-in, first-out (LIFO) inventory method described in section 

472. If you prefer, you can file an election statement that gives 

the same information requested on Form 970. 

How To Use Form 970 

You must complete Parts I, II, and VI. In addition, complete 

Parts III, IV, and V, as applicable. 

When To File 

File Form 970 (or a similar statement) with your tax return for 

the first tax year you intend to use the LIFO method. 

If you filed your return for the tax year in which you wish to 

use the LIFO inventory method described in section 472 

without making the election, you can make the election by filing 

an amended return within 12 months of the date you filed your 

original return. Attach Form 970 (or similar statement) to the 

amended return and write “Filed pursuant to section 

301.9100-2” at the top of Form 970. File the amended return at 

the same address the original return was filed. 

Change From LIFO Method 

Once you adopt the LIFO method, it is irrevocable unless the 

IRS allows you to change to another method. To request 

approval to change from the LIFO inventory method, you can 

use the automatic change procedures or the non-automatic 

change procedures. For details, see Form 3115, Application for 

Change in Accounting Method. Also see the Instructions for 

Form 3115.

LIFO Recapture Amount 

A C corporation must include in gross income a LIFO recapture 

amount (defined below) if it: 

1. Used the LIFO method for its last tax year before the first 

tax year for which an election to be taxed as an S corporation 

becomes effective, or 

2. Transferred LIFO inventory assets to an S corporation in a 

nonrecognition transaction in which those assets constitute 

transferred basis property. 

The LIFO recapture amount is the amount by which the C 

corporation’s inventory amount of the inventory assets using the 

first-in, first-out (FIFO) method exceeds the inventory amount of 

such assets under the LIFO method at the close of the C 

corporation’s last tax year as a C corporation (or for the year of 

the transfer, if (2) above applies). 

For additional information on LIFO recapture, see 

Regulations section 1.1363-2 and Rev. Proc. 94-61, 1994-2 

C.B. 775. Also see the Instructions for Form 1120 and the 

Instructions for Form 1120-S. 

Specific Instructions 

Name and Identification Number 

Enter the name of the filer on the first line of page 1 of Form 

970. In general, the filer of the Form 970 is the applicant. 

However, if Form 970 is filed on behalf of the applicant, enter 

the filer’s name and identification number on the first line of 

Form 970 and enter the applicant’s name and identification 

number on the second line. An individual’s identifying number is 

his or her social security number. For all others, it is the entity’s 

employer identification number. 

Part I—Statement of Election Under Section 

472 

Line 1. Enter the tax year the LIFO inventory method will first 

be used and list the inventory items for which you will use this 

method. Include only inventory items that are not already 

covered under a previous LIFO election. Attach a detailed 

analysis of all of your inventories as of the beginning and end of 

the first tax year the LIFO method will be used and the 

beginning inventory of the preceding tax year. Also, include the 

ending inventory reported on your tax return for the preceding 

tax year. See Regulations sections 1.472-2 and 1.472-3 for 

more details on preparing this analysis. 

Part III—Specific Goods (Unit) Method 

Line 12. See Regulations section 1.472-2 for more information. 

Part IV—Dollar-Value Method 

Line 15. Provide sufficient information to justify the pooling 

method you are using. Retailers, wholesalers, jobbers, and 

distributors are required to pool their goods by major lines, 

types, or classes, as authorized under Regulations section 

1.472-8(c). Manufacturers or processors can use the natural 

business unit pooling method, as authorized by Regulations 

section 1.472-8(b)(1), or can establish multiple pools of similar 

items in lieu of natural business unit pools, under Regulations 

section 1.472-8(b)(3)(i). Multiple pools include raw materials 

content pools authorized by Regulations section 

1.472-8(b)(3)(ii). 

Eligible small businesses can establish pools under the 

simplified dollar-value LIFO method (discussed below). 

Manufacturers or processors using the inventory price index 

computation (IPIC) method can establish pools based on the 

commodity codes in Table 6 of the Producer Price Index (PPI) 

Detailed Report. A retailer using the IPIC method can establish 

pools based on either the general expenditure categories in 

Table 3 of the Consumer Price Index (CPI) Report or on the 

commodity codes in Table 6 of the PPI Detailed Report. A 

wholesaler, jobber, or distributor using the IPIC method can 

establish pools based on the commodity codes in Table 6 of the 

PPI Report. The PPI and CPI Reports are published monthly by 

the U.S. Bureau of Labor Statistics (BLS). Under the IPIC 

method, you can also combine pools under special 5% rules. 

See Regulations sections 1.472-8(b)(4) and 1.472-8(c)(2) for 

more information. 

Describe any other method of pooling used. 

Simplified dollar-value LIFO method. An eligible small 

business can elect to use the simplified dollar-value LIFO 

method. See sections 474(c) and 448(c)(3). If you are a member 

of a controlled group, the gross receipts of the group are used 

to determine if you qualify. This method requires that you 
Form 970 (Rev. 11-2020) Page 4 

maintain a separate inventory pool for items in each major 

category in the applicable government price index, and that you 

make adjustments to each separate pool based on changes 

from the preceding tax year in the component of such index for 

the major category. You do not need IRS consent to elect these

provisions. The election is in effect for the first year the election 

is made and for each succeeding year you qualify as an eligible 

small business. The election can be revoked only with IRS 

consent. 

The simplified dollar-value method requires that general 

categories of inventory pools be established. The general 

categories are based on categories of inventory items 

contained in the PPI Detailed Report or the CPI Report. See 

section 474 and Regulations section 1.472-8 for more details. 

Line 16. Generally, you can only use the double-extension 

method or the inventory price index computation method. See 

Regulations sections 1.472-8(e)(2) and 1.472-8(e)(3) for a 

description of these methods. However, if you use the linkchain, index, or “other” method, attach a detailed statement 

explaining how the method is justified under Regulations section 

1.472-8(e)(1). In addition, if you use a link-chain method, your 

statement should explain why the nature of the pool makes the 

double-extension or index method impractical or unsuitable. 

New Vehicle Alternative LIFO Inventory Method. 

Automobile dealers engaged in the trade or business of retail 

sales of new automobiles or new light-duty trucks can adopt or 

use the New Vehicle Alternative LIFO Inventory Method under 

Rev. Proc. 97-36, 1997-2 C.B. 450, as modified by Rev. Proc. 

2008-23, 2008-12 I.R.B. 664, or any succesor. A new 

automobile dealer who previously elected this method under 

Rev. Proc. 92-79, 1992-2 C.B. 457 is not required to change its 

method of accounting to comply with Rev. Proc. 97-36. For 

information on accounting method changes to this method, see 

section 23.03 of Rev. Proc. 2019-43, 2019-48 I.R.B. 1107, or 

any successor. 

Used Vehicle Alternative LIFO Inventory Method. 

Automobile dealers engaged in the trade or business of retail 

sales of used automobiles or used light-duty trucks can adopt 

or use the Used Vehicle Alternative LIFO Inventory Method as 

described in Rev. Proc. 2001-23, 2001-10 I.R.B. 784, as

modified by Announcement 2004-16, 2004-1 I.R.B. 668, and 

Rev. Proc. 2008-23, or its successor. For information on 

accounting method changes to this method, see section 23.04 

of Rev. Proc. 2019-43, or any successor, and change number 

59 in the List of DCNs in the Instructions for Form 3115. 

Line 17. See Regulations section 1.472-8(e)(2) for more 

information. 

Part V—Inventory Price Index Computation 

(IPIC) Method 

Line 18. See Regulations section 1.472-8(e)(3)(iii)(E) for a 

description of the double-extension and link-chain IPIC 

methods, including examples. The use of either of these IPIC 

methods is a method of accounting. For information on 

accounting method changes to or within an IPIC method, see 

change numbers 61 and 62 in the List of DCNs in the 

Instructions for Form 3115. 

Line 19. Manufacturers, processors, wholesalers, jobbers, and 

distributors must select BLS price indexes from Table 6 of the 

PPI Detailed Report, unless the taxpayer can demonstrate that 

selecting BLS price indexes from another table of the PPI 

Detailed Report is more appropriate. Retailers can select BLS 

price indexes from either Table 3 of the CPI Report or from 

Table 6 (or another more appropriate table) of the PPI Detailed 

Report. 

Line 20. See Regulations section 1.472-8(e)(3)(iii)(C)(2) for a 

description of the 10 percent method. 

Line 21. See Regulations section 1.472-8(e)(3)(iii)(B)(3) before 

completing line 21. 

Part VI—Other Information 

Line 23. If you filed Form 3115 and received IRS consent to 

change your method of valuing inventories for the tax year 

specified on line 1, do not attach a copy of the approval letter 

(consent agreement). Retain a copy of the letter for your 

records. 

Privacy Act and Paperwork Reduction Act Notice. We ask for 

the information on this form to carry out the Internal Revenue

laws of the United States. You are required to give us the 

information. We need it to ensure that you are complying with 

these laws and to allow us to figure and collect the right amount 

of tax. Subtitle B and section 6109, and the regulations require 

you to provide this information.

You are not required to provide the information requested on 

a form that is subject to the Paperwork Reduction Act unless 

the form displays a valid OMB control number. Books or 

records relating to a form or its instructions must be retained as 

long as their contents may become material in the 

administration of any Internal Revenue law. Generally, tax 

returns and return information are confidential, as required by 

section 6103. However, section 6103 allows or requires the 

Internal Revenue Service to disclose information from this form 

in certain circumstances. For example, we may disclose 

information to the Department of Justice for civil or criminal 

litigation, and to cities, states, the District of Columbia, and U.S. 

commonwealths or possessions for use in administering their 

tax laws. We may also disclose this information to other 

countries under a tax treaty, to federal and state agencies to 

enforce federal nontax criminal laws, or to federal law 

enforcement and intelligence agencies to combat terrorism. 

Failure to provide this information, or providing false 

information, may subject you to penalties. 

The time needed to complete and file this form and related 

schedules will vary depending on individual circumstances. The 

estimated burden for individual taxpayers filing this form is 

approved under OMB control number 1545-0074; the estimated 

burden for business taxpayers filing this form is approved under 

OMB control number 1545-0123 and is included in the 

estimates shown in the instructions for their individual and 

business income tax return. The estimated burden for all other 

taxpayers who file this form is shown below. 

Recordkeeping . . . . . . . . . . 7 hrs., 53 min. 

Learning about the law or the form . . . . . 4 hrs., 3 min.

Preparing the form . . . . . . . . . . 8 hrs., 5 min. 

Sending the form to the IRS . . . . . . . 1 hr., 4 min. 

If you have comments concerning the accuracy of these time 

estimates or suggestions for making this form and related 

schedules simpler, we would be happy to hear from you. See 

the instructions for the tax return with which this form is filed.